Inside the Marshall Islands’ plans to launch its own legal tender cryptocurrency

You would be forgiven for letting the Marshall Islands slip your mind. The tiny nation of around 53,000 people sits in the middle of the Pacific Ocean, cast away from Silicon Valley or Switzerland’s Zug Valley, but it’s quietly plotting a project that could have a major impact on how cryptocurrency is viewed and regulated.

The island is launching its own national cryptocurrency token dubbed the Sovereign, or SOV, which will be legal tender for citizens and businesses on the island.

The bold plan is being spearheaded by Israeli fintech company Neema. It is the brainchild of CEO Barak Ben-Ezer who sought out sovereign nations that do not have their own currency to adopt the idea. The Marshall Islands, despite being a republic since 1982, uses the US dollar as its legal tender.

Ben-Ezer said that Neema was met with a mix of interest and scepticism from government officials when he first presented the proposal, but the Ministry of Finance and President Hilda Heine were on board.

“Luckily the president became infatuated with the idea and its promise,” Ben-Ezer told Hard Fork. “She immediately understood that there’s big potential here for the country and they were basically lobbying for that and convincing the other ministers until most of them were onboard.”

Now the wheels are in motion, but how will the ambitious plan work?

Government backing

The SOV will be complementary to the US dollar currently in use, explained David Paul, Minister in assistance to the president of Marshall Islands. The government has no plans to completely replace its fiat money in the near future.

However the early days of the currency will set the tone for this future, depending on how many people and businesses actually use it. The token will be issued through an initial coin offering, the preferred method of crypto startups for quickly raising money. According to Ben-Ezer, a token will likely be priced around $100.

The tokens will be capped at 24 million, with the sale expected to commence by third quarter of this year, said Minister Paul.

Crucially, the SOV has legal backing from the government, providing it some stability for users and will be treated just like regular money. In late February, the government – the island has no central bank authority – passed the Declaration and Issuance of the Sovereign Currency Act to make all of this possible.

For cryptocurrency, it’s a pretty significant step but on paper it still looks like a strange proposition. Cryptocurrency’s original tenets were based on zero government influence and no singular authority. The idea of a cryptocurrency issued by a state contradicts that.

“It’s important to emphasise that this cryptocurrency, the Sovereign, is completely decentralized and the government cannot control the money supply. After the [crowd sale], they don’t have any control over the currency, it circulates, and the money supply is predetermined on the blockchain,” explained Ben-Ezer.

“That was agreed together and it’s kind of going back to the days of the gold standard,” Ben-Ezer continued. “If you go back in time it used to be that when governments wanted to issue more money, they had to bring aboard more gold. They couldn’t just start the printers.”

Niklas Kossow is a Doctoral Student at the Hertie School of Governance in Berlin and a keen observer of cryptocurrency. He recently co-authored a report with Transparency International into the shadowy legal terrain of Bitcoin.

In this case, the legal footing provided by the government may help uphold the integrity of the project “to a certain degree,” he said: “At least [it is] creating a legal situation in which trading is taken out of the shadows and more regulated, that could help some investors to feel more secure.”

Ben-Ezer claims that the project has been approached by large financial institutions and investment firms expressing their interest but he’s tight-lipped on who they are.

Beyond that, Neema is sheepish on giving up too much technical information on the SOV, declining to comment on what blockchain exactly it will be built on or how many transactions it will be able to handle per second.

It’s currently “checking multiple options” for the “best way possible” to run the platform and scale it, the company said in a follow-up statement. When the cryptocurrency is eventually launched, all payments carried out will be recorded on this blockchain, whatever that turns out to be.

Enhancing the islands’ image

The Marshall Islands isn’t the first country to try this. Most notably, Venezuela has created its own cryptocurrency called Petro, which is pegged to the price of oil, to generate funds and skirt US sanctions. Other countries like Russia and Iran have flirted with the idea of a government-controlled cryptocurrency too.

The Marshall Islands on the other hand is unlike these countries. It is not under any sanctions from the US, but it has a bad reputation among the financial services industry and regulators as a tax haven and a scene for money laundering.

“While there is understandable concern by policy makers and regulators worldwide of the misuse of cryptocurrencies for tax evasion, money laundering, and terrorist financing, the SOV is designed on purpose to be unusable for these purposes,” countered Minister Paul.

Buying SOV tokens in the crowd sale will require fully identifying yourself with a government ID and a biometric marker, similar to many KYC methods employed by exchanges. According to the government, people (including tourists that visit the island) will eventually be able to buy SOV through exchanges.

“They issue to you an identity token, so each SOV wallet is associated with an identity token. You cannot send money out of an SOV wallet unless you have this identity token,” said Ben-Ezer. “In this manner, the funds within SOV always move between identified and verified wallets.”

According to Kossow, the verification process will be a key component in trying to prevent money laundering and should go some way to bolstering investors’ faith in the currency at these early stages.

“Law enforcement will be able to request, with appropriate authorisation, access to the source of funds that a person has received. This information will be recorded in the blockchain, and is unalterable,” added Minister Paul on the steps the government is taking to prevent illicit activity with the SOV.

For Ben-Ezer, this will all have a global impact: if one nation legally recognises a virtual currency as a sovereign legal tender then it may set off a chain reaction on how we view and regulate crypto.

“So now the SEC cannot really say it is a security and the CFTC cannot say it is a commodity and the IRS cannot say it is property,” said Ben-Ezer, referring to the various regulator definitions of cryptocurrency in the US. “It’s money, it’s just like the Shekel, the Euro, the Yen.”

Ben-Ezer believes that the Sovereign and the Marshall Islands will form a template for other governments to follow. How that will pan out remains to be seen and will depend on the success of this ICO.

“Our idea here is to create a Panama Canal between the world of fiat currencies, banks, and Wall Street and cryptocurrencies,” Ben-Ezer told us. “Sovereign will be a portal between those two worlds by virtue of being a fiat currency and a cryptocurrency.”

California Congressional candidate goes after fellow Democrat with anti-Bitcoin attack ad

A political hopeful recently aired an anti-Bitcoin attack ad against a rival competing for the Democratic nomination in the upcoming Congressional race for California’s 45th district. The ad, ran by Dave Min , targets Brian Forde’s donors, calling them “Bitcoin speculators that oppose cracking down on drug deals and human trafficking.”

File this under: Entertainment for people who hate Democrats.

Min, A former SEC attorney, who was also an aide for Senate Minority Leader Chuck Schumer, ran the ad which – among others – targeted Forde, an Obama-era White House cryptocurrency guru and former head of MIT’s cryptocurrency initiative.

Forde may very well be the first — or at least one of the earliest — American politicians to come out of the crypto-closet and openly accept donations in the form of cryptocurrency. Which makes Min one of the fist politicians to run anti-Bitcoin ads against an opponent.

We contacted Forde, who told us:

As far as we can tell, there’s absolutely no truth to the allegation that one of Forde’s donors said anything remotely close to the language in the attack ad. A report from Axios indicates that Min’s campaign manager feels the language is warranted because Forde accepted donations from a board member of The Bitcoin Foundation, Brock Pierce:

Forde responded to the attack in a Facebook post , saying he’d “rather fight for our progressive values than with fellow Democrats, and stay united in our goal of defeating Rep. Mimi Walters and her wholescale endorsement of the dangerous and irrational Trump agenda.”

We also reached out to Min, but didn’t immediately receive a response.

No matter what your politics are, the tired rhetoric that only criminals use Bitcoin has become borderline bigotry. Criminals use Bitcoin, but not quite as much as they use cash — according to experts . Criminals also use hammers, cars, and AR-15s, but those items don’t seem to be associated with them in the same way cryptocurrency is.

It stands to reason, for Min, that being branded a Luddite in a California Congressional district might hurt his campaign’s chances of success.

As for Forde, the attack ad may have actually helped his campaign. Cryptocurrency blogger Kiki Shirr, of dyorffrg , yesterday attended an event celebrating his recent fundraising success.

She told TNW:

UNICEF is asking gamers to mine cryptocurrency for children in Syria

It turns out that not every cryptocurrency campaign is designed to steal money. In an effort to raise funds for victims in war-torn Syria, UNICEF is now putting solidarity on the blockchain – and it is asking gamers to lend their powerful GPUs and help the humanitarian fund mine cryptocurrency for the Syrian children.

UNICEF has launched Game Chaingers in an effort to bring together gamers from across the globe and have them unite their computing power for a good cause:

“To participate in this operation, all you need to do is to install Claymore, a mining software,” the Game Chaingers website reads. “You will be able to start or stop mining when you want, and generate Ethereum right in UNICEF’s electronic wallet.” Interested users can find how they can get started here .

So far, the fund has raised a puny €15, but the project will run for another 57 days. At present, the blockchainified mining rig operates at 167 MH/s. There are only eight contributors in total so far though.

Netizens who want to contribute to this initiative but lack the computing resources to do so can chip in with direct donations. UNICEF has posted the address of its Ethereum donation wallet on the official Game Chaingers website .

This is hardly the first time the humanitarian fund has expressed interest in implementing blockchain technology in its operations.

Back in October last year, UNICEF Ventures co-founder Chris Fabian said the the company will not shy away from experimenting with the technology.

“If we are in a place to look at designing our own token, look at others to help design theirs in a way that we can be a part of, and potentially also have a crypto-denominated investment fund, those would all be things that would be on our roadmap for the near future,” Fabian commented.

Given how popular cryptocurrency and ICO campaigns are among hackers, my only concern is that putting funds raised for solidarity on an immutable decentralized network might be a costly risk. It is refreshing to see projects seeking to leverage blockchain tech for charity, but as we’ve previously seen: blockchain is by no means a magical fix for everything .

Meanwhile, Game Chaingers’ mining efforts will continue until March 31.